Ezra Holdings

[Musicwhiz]

Ezra has just announced their FY 2010 results and also a major acquisition. I will be posting my thoughts when I have gone through all the material(s).

Note: I am NOT vested.

[Musicwhiz]

With regards to the proposed acquisitions of two companies, the amount to be raised is about US$320 million, which is more than the cash balance on Ezra's books @ 31/08/2010. The combination of equity and debt will dilute earnings and dividends; and the debt will increase gearing which is already very high. The additional cash commitment (of US$50 million) will further reduce their cash balance (part of which was raised through an EPS-dilutive rights issue in early October).

Note that gross margins for Subsea Services for FY 2010 was a mere 3%! It is still not clear to me how Ezra intends for this partnership to garner higher gross margins; in fact operating costs are likely to increase without any immediate assurance of an improvement in gross and net margins. Why is the company making inroads into a segment which has such low gross margins?

Investors should evaluate the consequences of this decision in future periods when they announce results; to see if the acquisition was indeed worth the "pound of flesh" which Ezra has paid for. But based on the numbers which I've seen as at 31/08/2010 and the leverage and extra shares to be issued by Ezra, I'd say the Company is in a vulnerable and precarious position should a severe downturn or recession occur. (Note too that they will be increasing their interest expenses past the US$15.9 million, as the CB to be issued carries an interest rate of 5%).

This is just my initial analysis. Will post more when I go through more of the numbers.....

[Musicwhiz]

Business Times - 23 Oct 2010

Ezra buys Norway marine firm in US$250m deal

Q4 net profit falls 19% to US$21.6m; dividend declared

By JOYCE HOOI

IN a US$250 million move, Ezra Holdings is claiming more territory in the subsea market by buying Aker Marine Contractors (AMC) - a Norwegian marine operations and installation services firm - from Aker Solutions AS (AKSO).

Post-acquisition, the joint heft of Ezra and AMC will turn the entity into the fourth-largest player in the global subsea construction industry, according to Lionel Lee, Ezra's managing director. 'With AMC's engineering expertise, we will leapfrog into competing with the top three players in the market.'

Out of the US$250 million, US$50 million will be paid in cash. The remainder will be funded through a convertible bond issue with a par value of US$50 million and the issue of 72.48 million shares to AKSO.

The deal is expected to give Ezra - which has the bulk of its operations in the Asia-Pacific - access to the Gulf of Mexico, North Sea, Latin America and Africa.

The subsea market is poised for growth, according to Quest Offshore data cited by Ezra. Demand for the pipelines and umbilical cables essential to the industry is projected to increase at a compounded annual growth rate of 21.5 per cent from 2010 to 2014.

DBS Bank and JP Morgan (SEA) are the joint financial advisers to Ezra in the deal.

Ezra is also entering into a 50-50 joint venture in AMC Connector AS (ACAS) - a special purpose vehicle for the construction of a multi-purpose construction vessel worth about US$300 million - for a maximum consideration of up to about US$75 million.

The vessel - the AMC Connector - is currently under construction, slated for delivery in early 2012 and has secured a long-term charter with an European industrial firm.

At the same time, the group announced a 19 per cent decrease in net profit from US$26.8 million to US$21.6 million for its fourth quarter ended Aug 31, 2010.

For the same period, the group recorded a 17 per cent increase in revenue from US$93.5 million to US$109.3 million.

For the financial year ended Aug 31, 2010, Ezra posted a 9 per cent increase in net profit from US$70 million to US$76.1 million, on the back of a 7 per cent rise in revenue to US$353.6 million.

The increase in revenue was driven by increased contributions from the group's offshore support services and marine services divisions, but offset by a US$25.5 million decrease in revenue from the deepwater subsea services division.

While the overall gross profit margin for the group dipped from 31 per cent to 29 per cent, the deepwater subsea division saw its gross profit margin fall from 13 per cent to 3 per cent. This was attributed to a change in sales mix because of the completion of a major drilling project in the previous financial year.

'Obviously, we are not investing to get this kind of margin. Over time, you will see the margin picking up,' said Tay Chin Kwang, Ezra's finance director.

For FY2010, the offshore support division accounted for 56 per cent of total revenue, at US$198.7 million, followed by the marine segment at 38 per cent or US$134.2 million and the deepwater subsea segment with 6 per cent or US$20.7 million.

Fully diluted earnings per share rose from 11.7 US cents to 11.8 US cents. A final dividend of 1.5 cents per share has been proposed.

EOC Ltd, its Oslo-listed subsidiary, posted a 44 per cent surge in net profit to US$7.3 million for the quarter. The offshore oil and gas services provider's revenue for the same period also leapt 82 per cent to US$31.8 million.

[Musicwhiz]

Oct 25, 2010
Ezra grows with $325m acquisition
By Aaron Low

MARINE engineering company Ezra Holdings is paying US$250 million (S$325 million) to buy a Norwegian marine engineering firm.

The deal, announced last Friday, means Ezra will have subsea assets worth more than US$1 billion, making it one of the world's top subsea offshore marine engineering firms.

Ezra's acquisition of Aker Marine Contractors (AMC) from Aker Solutions will be paid for in cash and equity. After the deal, Aker Solutions will be a substantial shareholder in mainboard-listed Ezra.

Ezra managing director Lionel Lee said the deal will let the firm enter new markets in the Gulf of Mexico, the North Sea, Latin America and Africa.

Aker Solutions chairman Oyvind Eriksen said the move will allow the new Ezra/AMC company to compete globally.

Ezra also announced that its full-year net profits had risen by 9 per cent to US$76.1 million from the figure a year earlier, even though fourth-quarter earnings fell 19 per cent to US$21.6 million.

Turnover for the year ended Aug 31 rose by 7 per cent to US$353.6 million, mainly on contributions from newly delivered vessels and engineering activities from Ezra's Vietnam yard.

Fourth-quarter revenue rose 17 per cent to US$109.3 million. Net cash flow from operating activities rose to US$50.4 million, a reversal from the negative US$26.2 million a year earlier.

Net asset value rose to 90.12 US cents from 81.18 US cents a year earlier. Full-year earnings per share fell to 11.56 US cents from 11.7 US cents. The company has proposed a final dividend of 1.5 cents.

DBS Vickers is keeping its 'buy' recommendation for the shares, with a target price of $2.44.

Ezra was at $1.82 before trading of its shares was halted ahead of its announcements.

[Musicwhiz]

As usual, CIMB are the most bullish, as always the case I think for Gems TV during the bull market back in 2007 as well.......

Business Times - 26 Oct 2010

STOCK IN THE NEWS
Ezra's results, AMC deal draw mixed reactions

By JOYCE HOOI

MIXED reactions to Ezra Holdings' results and an acquisition announcement on Friday saw the stock close 2.2 per cent, or four cents, lower yesterday at $1.78.

While Ezra lifted its FY 2010 revenue 7 per cent to US$353.6 million and its net profit 9 per cent to US$76.1 million, OCBC Investment Research's Low Pei Han pointed out that the results were boosted by fair-value changes for derivative instruments and gains on asset disposals.

'Stripping such items out, core net profit is estimated to be around US$55 million, below our expectations,' Ms Low said in a report yesterday in which she cut Ezra's fair-value estimate from $2.52 to $2.27 with a 'buy' rating.

She noted that Ezra incurred higher-than-expected administrative expenses of US$49 million in FY 2010 - up 54 per cent - as it expanded operations internationally.

DMG & Partners Research's Jason Saw, on the other hand, raised the stock's target price to $2.40 from $2.03 in anticipation of higher valuations from Ezra's US$250 million acquisition of Aker Marine Contractor (AMC).

'We view the acquisition positively given the deal will make Ezra one of the top five (engineering, procurement, installation and construction) and (sub-sea, umbilicals, risers and flow lines) solution providers and boost its geographical presence in new markets which may take years to develop,' Mr Saw said in his latest report on the company.

'The deal also removes investors' concern on future chartering of Ezra's deepwater fleet,' he said.

But Mr Saw noted the dilutive effect of issuing 72 million new shares to Aker Solutions as part of the payment structure.

'We lower our FY 2011-2012F EPS by 30 per cent and 9 per cent respectively to reflect lower sub-sea earnings in the first year and dilution from 72 million new shares to be issued to Aker Solutions,' he said.

The acquisition of AMC - a company that specialises in sub-sea operations and installation services - is expected to give Ezra a foothold in the areas where it does not already have a presence, namely the Gulf of Mexico, the North Sea, Latin America and Africa.

Kim Eng's Rohan Suppiah, who did not rate the stock but included it in the 'Hot Stock' section of the firm's daily report with a three-chilli rating, issued a note on the acquisition, saying that 'while there is strong rationale for the purchase, Ezra has some ways to go to integrate and implement this acquisition to fully capitalise on this fast-growing and lucrative segment of the offshore market'.

CIMB Research said in a report that while Ezra's full-year results met expectations, they have been overshadowed by news of the acquisition.

CIMB analysts gave Ezra's stock its biggest price tag, valuing it at $3 a share, up from $2.60.

[Musicwhiz]

Dear all, I have posted up an analysis of Ezra's FY 2010 results as well as given some views on their proposed acquisitions on my blog. Please feel free to visit and comment, thanks! Note: I am NOT vested.

A snippet as follows:-

"Offshore support services' gross margin fell from 38% to 35%, while deepwater subsea services' gross margin fell significantly from 13% to a mere 3%. Fortunately for Ezra, deepwater subsea only took up 6% of FY 2010, revenue, as compared to 14% for FY 2009; otherwise the impact to overall gross margins would have been more striking."

[dydx]

Ezra is like a monster to me. I am scared!

[Musicwhiz]

Ezra is like a monster to me. I am scared!

Haha dydx, so will you be the knight in shining armor to slay the "monster"?

[Jon-san]

they're buying up companies like commodities have been doing so in the last 2 years?

[Musicwhiz]

Business Times - 13 Jan 2011

Ezra posts 28% drop in Q1 net to US$13m

Increase in financial expenses was main cause for decline

By JOYCE HOOI

EZRA Holdings posted a 28 per cent decline in first quarter net profit for the period ended Nov 30, 2010, from US$18.5 million to US$13.3 million.

Revenue for the same period, however, rose 25 per cent from US$60.9 million to US$75.9 million.

The rise in revenue was driven by the group's marine services division and deepwater subsea services, which saw increases of US$2.4 million and US$15.1 million, respectively. Revenue from the offshore support services segment, however, declined by US$2.5 million.

The blow to the bottom line was dealt mostly by an increase in financial expenses, from US$1.9 million to US$5.5 million, driven by the group's expansion efforts of late.

'We are positive about prospects for the offshore oil and gas sector. As deepwater development and production activities expand, we believe demand for our medium to large offshore support vessels, which are able to operate in deep waters, will remain high,' said Lionel Lee, Ezra's managing director.

Earnings per share for the quarter stood at 1.79 US cents for the group, down from 2.43 US cents in the corresponding period from the year before.

EOC Ltd, Ezra's Oslo-listed subsidiary, posted a plunge in Q1 net profit at US$566,000 compared to US$9.9 million the same period a year ago.

While revenue fell 14 per cent to US$23.5 million, cost of sales and interest expenses shot up.

Nonetheless, management remains positive on the unit's prospects.

'There are clearer signs of an increase in exploration and development activities in the offshore oil and gas sector in the Asia-Pacific . . . This bodes well for the current opportunities that we are vying for in both the construction and FPSO segments,' said Lim Kwee Keong, EOC's chief executive officer.

Separately, Ezra announced yesterday that it had been awarded new charters worth up to US$73 million for three of its offshore support vessels.